Backward Integration with every sip of wine

 “A bottle of  wine contains more philosophy than all the books in the world”

- Louis Pasteur (French microbiologist)

Let’s toast for today’s reading on backward integration with help of Sula Vineyards. So what is backward integration and how it influences supply chain? Backward integration is type of vertical integration where the firm integrates itself with the suppliers of its supply chain to gain control over the raw materials. This control in-turn helps the firm not only in revamping its supply chain strategy but also in constructing certain benefits like

• Having check on raw materials quality
• Minimizing the threat of raw materials being sold to competitors
• Cutting the markup costs fixed by the middlemen during the process of procurement
• Creating a entry barrier by accessing the control of the suppliers
• Having a lead on product differentiation

And now to the Wine, when you hear the term winery/vineyard which country strike’s your brain? In my case it was France until I read about Indian wine industry. Being a tropical region India posse’s soil types which set it appropriate for the cultivation of certain varieties of grapes, out of which some twinkles for being enjoyed as a luxury drink.   Sula Vineyards leads the country’s wine market by 65%, the firm found the potential of wine making back in the year 1999 and since it has established itself as country’s #1 wine distribution network with a connectivity of 33 states and 26 countries (export).

 

 The indigenous wine of Sula which one tastes puts together the imports of Oak barrels (wine storing wooden barrels) from France and fermenting yeast from Australia. Yet when it comes to the subject of grapes it has always been native grown. While bringing together the grapes which were cultivated at different places by different farmers who practiced different methodologies of growing the fruit was one of the major challenges Sula faced. As the fruit tasted different attaining the desired quality of wine became more challenging.

 Resolving this, Sula started practicing the backward integration strategy where the firm provided the selected farmers with grape seeds, organic fertilizers (Wine waste to supplement the growth), and finally the education on how to cultivate the fruits uniformly. In certain cases, Sula also acquires the land from the farmers and installs necessary technology like drip irrigation and gives them the access to cultivate and harvest according to the standard set by firm’s agro team.

This strategy hasn’t not only helped Sula in making a standard quality wine but has also narrowed down the opportunity of new entrants and competitors by buying wineries from top grape cultivation lands of India especially from states like Maharashtra and Karnataka. Currently the firm cultivates more than 2000 acres of land which enables a production of more than 1 million cases (each case holds 12 bottles of 750 ml)

Sula has set the Indian wine market’s bar high by exporting to countries like Australia, Netherlands, and United States +23 more. And thus folks, next time when you are in wine section of the supermarket do check for a tag of Made in India. #Happy_Learning 2